Maybe April wasn't a fluke. For the second straight month, the average price of a U.S. single-family home rose in May, according to the S&P/Case-Shiller Home Price Index.
Prices were up 2.2 percent over April, but down 0.7 percent from May 2011. Still, the year-over-year decline is the smallest in 18 months.
While rising prices are generally not good for consumers, in this case they are. The housing market has been unable to recover because of falling home prices. Because prices have been falling, banks have been skittish about lending money for mortgages unless borrowers make large down payments and possess sterling credit ratings.
If prices begin to rise again, current homeowners will regain some of their lost equity and would-be buyers could find it easier to obtain a mortgage. That might lead to more home sales, which has a stimulative effect on the economy.
Not all good news
Meanwhile, the May data were not all good news. Home prices fell annually by 1.0 percent for the 10-City Composite and by 0.7 percent for the 20-City Composite, measured against May 2011. Both Composites and 17 of the 20 Metropolitan Statistical Areas (MSA) saw increases in annual returns in May compared to April.
Boston, Charlotte and Detroit were the three cities that saw their annual returns get worse in May. Atlanta continues to be the only city posting a double-digit negative annual return with -14.5 percent. However, this is an improvement over the -17.0 percent annual decline recorded in April 2012. All 20 cities and both Composites posted positive monthly returns. No cities posted new lows in May 2012.
Continuing a positive trend
"With May's data, we saw a continuing trend of rising home prices for the spring," said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns.
While this is an encouraging sign, Blitzer cautions not to read too much into it. He says spring and early summer are seasonally strong buying months. To conclude the housing market has indeed bottomed, as Zillow reported last week, Blitzer would like to see the trend of rising prices continue throughout the summer and into the fall.
But looking at the data, it's hard not to be optimistic. Some of the nation's hardest hit housing markets are recovering.
Weakest markets getting stronger
The May data show Phoenix once again posted the best year-over-year return. Average home prices in that region were up 11.5 percent versus May 2011. It was one of the hardest hit cities in the collapse, and prices are still more than 50 percent below their June 2006 peak, but the past five months have been positive for that market, Blitzer says.
Miami and Tampa are two other Sunbelt cities that were hard-hit in the downturn, but are also showing positive annual rates of change. Las Vegas, ground zero for the housing collapse, posted both a positive monthly change in May and saw an improvement in its annual return. But it still has a long way to go, since the market is still more than 60 percent below it August 2006 peak.
"June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels," Blitzer said. "The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months."
How they voted
Yes
Yes